The focus of this blog is on the wonders of government-run health-care everywhere but I also note the damage done to private medicine by a legal system that supports predatory litigation.

The long-established socialized medicine systems in Britain and Australia are a particularly relevant warning about where such systems end up.

Posts by John J. Ray (M.A.; Ph.D.)

Tuesday, September 22, 2009

Obama: It’s only a tax increase if I call it one

President Obama insists that requiring Americans to get health insurance does not amount to a tax increase. In a testy exchange on ABC's "This Week," broadcast Sunday, Obama rejected the assertion that forcing people to obtain coverage would violate his campaign pledge against raising taxes on middle-class Americans. "For us to say you have to take responsibility to get health insurance is absolutely not a tax increase," Obama said in response to persistent questioning, later adding: "Nobody considers that a tax increase."

A proposal going before the Senate Finance Committee this week includes the mandate for health coverage. Obama has praised the plan in general, and indicated in the interview conducted Friday that he could back the coverage mandate. He noted that consumers currently pay higher health insurance premiums due to the costs run up by hospitals and other facilities providing care to uninsured people.

Those unable to afford health insurance should get government help, Obama said, but others who can afford coverage but choose not to get it should face coverage requirements similar to those for auto insurance. "What it's saying is ... that we're not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance," he said. "Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that, if you hit my car, that I'm not covering all the costs."

Asked again about critics calling the requirement to pay for health insurance a tax increase, Obama said: "My critics say everything is a tax increase."

On another aspect of his desired health care reform, Obama said cutting billions of dollars in government subsidies for Medicare Advantage would not reduce essential coverage for senior citizens in that program. The government cites the proposed subsidy cut for Medicare Advantage -- an enhanced program within Medicare -- as an example of how it can reduce health care spending while expanding coverage to millions of uninsured Americans.

Republican opponents say cutting Medicare costs will reduce benefits for senior citizens, a claim Obama has denied as misinformation. When pressed on that issue in the interview, Obama said Medicare Advantage provided essentially the same level of medical care as regular Medicare while costing the government much more due to the subsidies.

Insurance companies were "overcharging" for the service, Obama said, insisting that the change would mean senior citizens will get the same level of coverage at a lower cost to the government. "Now, they package these things in ways that, in some cases, may make it more convenient for some consumers, but they're overcharging massively for it," Obama said. "There's no competitive bidding under the process."

He said people currently signed up for Medicare Advantage would still get regular Medicare coverage "and the same level of benefits, but they may not be having their insurer get a 14 percent premium." "And will the insurers squawk? You bet," Obama said, rejecting claims that those enrolled in Medicare Advantage would be left with substandard benefits. "These folks are going to be able to get Medicare that is just as good, provides the same benefits, but we're not subsidizing them for $18 billion a year."

Republican response to Obama on Sunday called the president's promises of expanded health coverage at lower costs too good to be true. "It's just not believable," said Michael Steele, the Republican National Committee chairman, on the CBS program "Face the Nation." No matter what Obama says, Steele added, "Taxes are going to go up for the middle class because they have to."

Sen. Lindsey Graham, R-South Carolina, said on the NBC program "Meet the Press" that Obama "is selling something that people quite frankly are not buying." "This is not about tone -- this is about policy," Graham said.

Also appearing on the show, House Minority Leader John Boehner, R-Ohio, said health care reform as proposed by Obama and the Democrats was dead in Congress. "At some point when these big government plans fail -- and it will, the Congress will not pass it -- it's really time for the president to hit the reset button," Boehner said.

For his part, Obama offered a different perspective on the Republican position, telling Univision in an interview broadcast Sunday that Republicans -- for political reasons -- "are just not going to support anything."

Give President Obama credit for persistence. And stubbornness. And lack of imagination. He declared again last week that his health care plan "will slow the growth of health care costs for our families and our businesses and our government." And this historic achievement will be accompanied by a dazzling array of new medical benefits that everyone will receive--guaranteed by law. Okay, you've heard this before. But that's the president's story, and he's sticking to it.

The question is, why? Does he think we're stupid? His argument has failed to persuade a sizeable majority of the American people precisely because they're not stupid. They understand the laws of addition and subtraction. When you offer more--much, much more in this case--of a good, it's going to cost more. Somebody has to pay for it. Yet Obama says we'll all be paying less, and that includes businesses and government.

If he could actually pull off this feat, he would indeed be the One we've been waiting for. But he can't. This is apparent whenever Obama explains where the "savings" will come from. They're from eliminating "hundreds of billions of dollars" in waste, fraud, and abuse (WFA) in the health care system. Surely, he knows better. Everyone in Washington recognizes these savings are imaginary. They're offered with a wink. They never happen. President Reagan promised to slash WFA in the 1980s. The result: zilch. Where Reagan failed, Obama is not likely to succeed.

Obama may be unaware, but there are three programs--in Maine, Massachusetts, and Tennessee--currently testing his idea of get-more-pay-less. The evidence is already in: Expanded health care coverage costs more, an awful lot more. There are no known exceptions.

The test cases mirror Obamacare in one way or another. In 2003, Maine decided to cover the uninsured by expanding the state's Medicaid program and creating a government-run "public option" to provide health insurance with subsidized premiums. Controls on hospital and doctor costs would lead to reduced premiums and savings for everyone, without tax increases, or so it was claimed. Five years later, "the system that was supposed to save money has cost taxpayers $155 million and is still rising," the Wall Street Journal reported. Meanwhile, Medicaid enrollment has doubled to 22 percent of the state's population, and access to the public plan has been capped.

In Massachusetts, "universal" coverage was enacted in 2006 along with a requirement that everyone be insured or pay a fine. (By 2009, the fine was up to $1,068.) Again, the claim was made--a claim Obama repeats--that costs would decline once everyone was covered. Today, 97 percent of Massachusetts citizens are covered, the highest rate in the country. But costs have soared to the point the New York Times characterized them as "runaway." Spending on the state's health insurance program has risen by 42 percent. A major cause shouldn't have surprised anyone: The newly insured have flooded doctors' offices for medical care paid for by others. Now Governor Deval Patrick, a close ally of Obama, wants to impose cost controls.

The Tennessee experiment began in 1994 with one thought in mind: curbing the rise in health care costs. TennCare was established to cover everyone either on Medicaid or unable to obtain insurance. Rather than bend downward, the cost curve has steeply climbed. In a decade, spending surged from $2.5 billion to $8 billion. To cope with this, the state is cutting the TennCare rolls and reducing benefits. The program still consumes a higher share of the state budget than any Medicaid program in the country.

AFTER MONTHS of work, Senate Finance Chairman Max Baucus has come up with a health bill that pleases neither Republicans nor many Democrats, but insurers must be smiling broadly.

It’s no surprise that his bill includes no public sector insurance plan. Instead, the only competition that giant insurers face will come from tiny co-operatives - and even then, to qualify for federal funding, they must be fledglings. Established co-ops will not qualify for help. Thus, private insurers can count on controlling the marketplace as millions of new customers who don’t have job-based coverage are required by law to come their way, tax subsidies in hand.

But what is shocking is that under the Baucus plan, a 50-year-old single parent could wind up paying far more for health insurance than a 28-year-old single adult who earns twice her salary. The Baucus bill won’t let insurers hike premiums because a customer suffers from a pre-existing condition. But it lets insurers charge older Americas five times as much as younger customers.

In a July letter to House leaders, the trade group America’s Health Insurance Plans called for the 5 to 1 ratio, saying anything less than that would force many young people to pay more to “heavily subsidize the naturally higher health care costs of older individuals.’’ House Democrats refused. The House bill, like Massachusetts, says that insurers can charge older adults no more than twice what they bill younger ones.

The Baucus legislation also imposes a penalty on single-parenthood. If you live alone with one child, you will be asked to shell out 80 percent more than a childless adult.

Of course it makes sense that coverage for a mother and child would cost more than the premium for a single person. But since children typically use much less health care than adults, 80 percent is a steep surcharge for single-parenthood - especially since a couple with children would pay only 50 percent more than a childless couple.

The Baucus bill also punishes smokers, adding 50 percent to their premiums. No doubt many would argue that this is only fair. But the vast majority of adults who smoke are poor. Many will qualify for full subsidies; others will be eligible for partial subsidies to help them pay for their premiums.

So who will pay 50 percent more for their health care? You, the taxpayer. If the smoker receives a subsidy, the 50 percent surcharge isn’t likely to induce him to stop. This rule seems designed primarily to funnel more taxpayer dollars to private sector insurers.

Single parents also tend to cling to the lower rungs of the income ladder. Many will qualify for at least a partial, if not a full subsidy. Who lays out the extra 80 percent? That’s right - you and I.

Finally, if under the Baucus bill, insurers can charge middle-income 50-somethings five times as much as even the most affluent 20-somethings, a great many of those older customers are going to need fat subsidies, sending more tax dollars to Aetna.

Granted, premiums are capped at 13 percent of income if you earn somewhere between 300 percent and 400 percent of the federal poverty level. But this means a 56-year old couple with joint income of $58,000 could wind up paying premiums of more than $7,500 - plus out-of-pocket expenses. Couples earning more than 300 percent of poverty ($43,710 in 2009) don’t qualify for subsidies.

Under the more generous House bill, couples earning up to 400 percent of poverty (or $58,280) would be eligible for federal help. Tax increases for the top 1.5 percent of earners would help fund the subsidies. By contrast, under the Baucus plan, middle-class and upper-middle class Americans who buy insurance but don’t qualify for subsidies would help foot the bill for those who do.

The irony is that in the end, neither conservatives nor progressives are backing the Baucus proposal. The senator’s goal was bipartisan reform. But he has failed to achieve that. Instead, by eliminating a public option that might have set a benchmark for high quality, affordable care and by offering stingy subsidies that exclude many middle-income families, he has watered down reform without pleasing either side of the aisle.

Last Wednesday the nation was riveted to the President’s speech on healthcare reform before Congress. While the President’s concern for the uninsured is no doubt sincere, his plan amounts to a magnanimous gift to the health insurance industry, despite any implications to the contrary.

For decades the insurance industry has been lobbying for mandated coverage for everyone. Imagine if the cell phone industry or the cable TV industry received such a gift from government? If government were to fine individuals simply for not buying a corporation’s product, it would be an incredible and completely unfair boon to that industry, at the expense of freedom and the free market. Yet this is what the current healthcare reform plans intend to do for the very powerful health insurance industry.

The stipulation that pre-existing conditions would have to be covered seems a small price to pay for increasing their client pool to 100f the American people. A big red flag, however, is that they would also have immunity from lawsuits, should they fail to actually cover what they are supposedly required to cover, so these requirements on them are probably meaningless. Mandates on all citizens to be customers of theirs, however, are enforceable with fines and taxes.

Insurance providers seem to have successfully equated health insurance with health care but this is a relatively new concept. There were doctors and medicine long before there was health insurance. Health insurance is not a bad thing, but it is not the only conceivable way to get health care. Instead, we seem to still rely on the creativity and competence of politicians to solve problems, which always somehow seem to be tied in with which lobby is the strongest in Washington.

It is sad to think of the many creative, free market solutions that government prohibits with all its interference. What if instead of joining a health insurance plan, you could buy a membership directly from a hospital or doctor? What if a doctor wanted to have a cash-only practice, or make house calls, or determine his or her own patient load, or otherwise practice medicine outside the constraints of the current bureaucratic system? Alternative healthcare delivery models will be at an even stronger competitive disadvantage if families are forced to buy into the insurance model. And yet, the reforms are sold to us as increasing competition.

What if just once Washington got out of the way and allowed the ingenuity of the American people to come up with a whole spectrum of alternatives to our broken system? Then the free market, not lobbyists and politicians, would decide which models work and which did not.

Unfortunately, the most broken aspect of our system is that Washington sees the need to act on every problem in society, rather than staying out of the way, or getting out of the way. The only tools the government has are force and favors. These are tools that many unscrupulous and lazy corporations would like to wield to their own advantage, rather than simply providing a better product that people will willingly buy. It seems the health insurance industry will get more of those advantages very soon.

Medicare: As Democrats try to remake the health care system in the face of bitter opposition, the federal public option for the elderly is preparing to cut benefits. This should be part of the debate, but of course it's not.

Supporters of the health care revision tell us that its $1 trillion price tag won't add a dime to the national deficits. But the reality is, any program that expands Washington's reach into health care will cost far more than the rosy projections we're hearing. History shows that the bureaucracy always spends far more on programs than the Beltway experts say it will.

One program that has spun wildly out of control is Medicare, enshrined as an entitlement in 1965. Actuaries projected its cost for 1990 at $10 billion. Yet actual outlays were $107 billion. Now the program is spending more than it is taking in through the payroll tax that funds it, leaving Washington with only two options: ration Medicare or raise taxes.

Don't make the mistake of thinking that brilliant minds in Washington will figure out a way to avoid rationing before it becomes necessary. Those heads are busy looking for places to slash now. Medicare, for instance, is considering cutting $1.4 billion in benefits beginning on Jan. 1, 2010. If the new schedule is adopted, the reductions will be in fees paid to cardiologists and oncologists.

At the same time that fees for heart and cancer physicians will be trimmed by 10%, fees paid to family doctors will be boosted by 8% and reimbursements paid to nurses will rise 7%. The administration believes that moving the fees toward primary care will be a boost for preventive care.

There are two points to take away from this mostly ignored news. One, any scheme passed by this Congress and signed into law will cost taxpayers dearly. Two, the government will have to ration care because it cannot possibly pay for a nation of 305 million demanding its "free" medical care.

If the rationing is adopted, it will have a direct effect on patients, particularly those who are suffering from two of the most serious illnesses. Heart and cancer specialists, who will be expected to accept Medicare reimbursements that are less than some procedures cost, are already reporting that they will either close their practices or limit care. Some will simply stop treating Medicare patients.

Anyone who believes Washington can improve health care by increasing its involvement is not thinking clearly. Its solutions tend to create bigger problems. Yes, a government takeover may improve care for a small segment of the population. But it will be far worse for everyone else.

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Background

Postings from Brisbane, Australia by John Ray (M.A.; Ph.D.) -- former member of the Australia-Soviet Friendship Society, former anarcho-capitalist and former member of the British Conservative party.

This blog gives a lot of attention to events in Australia and Britain -- places where there already exist systems similar to the one most likely to befall the USA if the Democrats get their way -- "Free" medical care supposedly available to all through government hospitals but with a competing private sector as well. The Canadian system is considered too Soviet to provide a likely model for the USA

TERMINOLOGY: Many of my posts concern the very instructive state of socialized medicine in Australia. Like the USA, Germany and India, Australia has a system of State governments which have substantial independence from the central (Federal) government and it is they who are mainly responsible for "free" health services. It may therefore be useful to some for me to note the standard abbreviations for the States concerned: QLD (Queensland), NSW (New South Wales), WA (Western Australia), VIC (Victoria), TAS (Tasmania), SA (South Australia).

For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

Conservatives do NOT object to helping the poor. Government welfare legislation in aid of the poor was in fact first introduced by conservatives -- Bismarck and Disraeli in the 19th century. What conservatives want is for the help to be delivered in a sane manner. And anyone who thinks that government bureaucracies can run hospitals well is completely out of touch with reality.

One of the oldest "free" public hospital systems in the world is that in the Australian State where I live: Queensland. It dates from 1944 (Britain's NHS began in 1948). So its advanced state of decay reveals well where the slow cancer of bureaucracy ends up. It now has three "administrative" employees for every medical employee. All those clerks are really good at curing people, I guess! Frequent bulletins on the flailing but ineffectual attempts to "fix" the system will appear here -- as well as bulletins on the dreadful things it does to patients and the long waits they endure.

On all my blogs, I express my view of what is important primarily by the readings that I select for posting. I do however on occasions add personal comments in italicized form at the beginning of an article.

I am rather pleased to report that I am a lifelong conservative. Out of intellectual curiosity, I did in my youth join organizations from right across the political spectrum so I am certainly not closed-minded and am very familiar with the full spectrum of political thinking. Nonetheless, I did not have to undergo the lurch from Left to Right that so many people undergo. At age 13 I used my pocket-money to subscribe to the "Reader's Digest" -- the main conservative organ available in small town Australia of the 1950s. I have learnt much since but am pleased and amused to note that history has since confirmed most of what I thought at that early age.

I imagine that the the RD is still sending mailouts to my 1950s address!

NOTE: The archives provided by blogspot below are rather inconvenient. They break each month up into small bits. If you want to scan whole months at a time, the backup archives will suit better. See here or here